The Internal Revenue Service, halfway through a decade of restructuring, still provides poor customer service and fails to enforce tax laws, said the IRS Oversight Board in its annual report.

"The IRS must work harder and smarter," the board said.

The report was scheduled to be submitted Wednesday afternoon to the House Treasury-Transportation Appropriations Subcommittee, when newly installed IRS Commissioner Mark Everson made his first appearance before a committee as commissioner.

While the report says understaffing and underfunding is partly to blame-the workload of the IRS has increased 16 percent over the past decade while the number of its employees dropped by 16 percent-the agency also is not moving as quickly to reform itself as it could.

The report called for a 2 percent increase in staffing at the IRS in each of the next five years. The board also recommended that the IRS, Congress and the Bush administration work together to:

Crack down on noncompliance with tax laws, which has risen in the past decade as IRS resources have declined.

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